Ways to get out of debt

As a parent, it's very easy to spiral into debt and life can often feel like one big 'spend-a-thon'. Money worries become even more of a pressure if you are faced with divorce or separation - getting a handle on your debts can take a huge weight off your shoulders.

Before you do anything

The first step to sorting out debt issues is to fully accept that there is a problem. Many people find it easier to lock debt problems away in the back of their mind, almost as if ignoring it will make it go away. Sadly it won't and the longer it's ignored, the quicker the debts will build up.

DIY debt solutions

The second step involves working out how bad things are and whether you can make enough changes to start paying off your debts.

So now you need to work out:

How much money you bring in each month

How much money you spend each month

How much money you owe and how much of the money that you spend goes on repayments.

This may take a bit of time as you need to be as accurate as possible - you'll need to sit down with your bank statements, any overdue credit card bills/payments and a calculator. Think about where your cash goes too (keep a diary for a week if it helps).

There are a number of ways to save money and start paying back debts and the option you choose will depend on your income, lifestyle and general outgoings each month. Here are some things to think about.

Saving money

Start by looking at your spending to see exactly where the money is going. See if you can identify unnecessary spending that you can cut down on; little purchases like lattes, new clothes, magazines and expensive groceries are a nice treat but if you find those sorts of things are taking your money, you need to decide whether you really need them. If you cut these items out or at the very least swap them for less expensive solutions like making your own coffee, holding a clothes swapping party or reading magazines online, you might notice a difference to your outgoings.

You might also think about some of the more fundamental things. How about travel - can you save a couple of car trips each week by combining journeys, or by sharing lifts with a friend? Can you save money on food by being a little more organised? Netmums members have been sharing shopping lists to show how they feed their family on fifty pounds a week in our Coffee House budget board.

Finally, change your utilities providers. Keep an eye on the best deals for gas and electricity. Also see what you can do to reduce your energy bills

Repaying debts

There are a few things to look at when planning how you are going to repay your debts:

Negotiate lower payments

Move your debt to a different company

Prioritise your repayments

Your mortgage lender/gas/electricity provider and credit card company should have a financial help branch to their organisation that you can speak to regarding payments. With their help, you might be able to lower the monthly repayments or come to a new arrangement that suits you and guarantees they are getting the money due to them. Make sure you tell them what you can afford, and don't agree to paying more than you can. Even if you can't manage to pay what they are asking for, it's better to pay them what you can afford rather than nothing at all.

Now might not be the best time, but if you have a mortgage and the rate is quite high, it might also worth looking around at rates elsewhere. If you can find a better deal with another mortgage lender it could save you quite a lot of money over time.

If your debts are across several entities, you'll need to prioritise which ones to pay back first. Dig out your original credit card/loan agreements and have a look at the interest rates. It's wise to start paying off your most expensive debts first - especially those that charge late payment fees and extortionate rates of interest. Once you've got on top of these, you can move on to the next repayment, until all of your debts are finally under control. Also take account of how important the creditor is to your daily life. If you are in danger of having your electricity cut off, for example, doing something about that will be a priority.

Debt consolidation - be aware...

Debt management or consolidation companies are seen as helpful but there is often a danger that the debts will take longer to pay back as the lower repayments are spread out over a number of months/years which means you could end up paying more back in interest rates. If you are thinking of going this route, be very careful to check their proposed repayment plan thoroughly and only agree to it if you're certain it's mapped out appropriately with no extra cost to you.

Many companies carry hidden charges on consolidated repayment plans so make sure you query this with them first as they could end up increasing the overall payment even more. It's also important to read the small print. It's amazing how many important details can be hidden away in tiny text so check it thoroughly before you commit to anything.

So if you think this is the way to go it is essential to shop around for a good service and opt for one that's legitimate and regulated annually. Most websites you visit should have an 'about' page with information about their regulating bodies and their code of practice.

Alternatively, you might decide to have a go at consolidating your debts yourself by taking out a loan and using it to pay off all your existing debts. Check that the loan will end up giving you a lower overall rate of interest.

Will all these changes be enough? More ideas...

Now ask yourself: After making the changes, am I bringing in enough money to cover the repayments and all the other things I have to pay for?

If your answer is no, you need to get some good advice from National Debtline or Citizen's Advice Bureau (details below)

If repaying your debts seem physically impossible to you, there is the option of declaring bankruptcy. This may seem like the easy way out (especially if you don't own anything valuable that could be sold to pay off your debts) but it will carry implications for your credit rating and future borrowing. Bankruptcy should really be seen as a last resort when all other attempts to repay debts have been explored.

There are other options too and the national support organisations will be able to give you further advice on what the possibilities are.

It's important to be patient during the repayment process. Getting out of debt can take time and is likely to mean a more restrictive lifestyle for you. But, there is light at the end of the tunnel and a debt-free life can feel amazingly liberating. It will be worth it! Some of the following tips can help:

Think of thrifty ways to make money - can you hold a car boot or garage sale? Is there a spare room that would make perfect digs for a lodger? Do you have time to take on a small part-time job in the evenings or weekends?

Avoid easy ways to spend money such as catalogues, the Internet and TV shopping channels. Recycle the catalogues, avoid the shopping sites and switch off the TV - your bank balance will thank you for it!

If you really need something, can you buy it second hand? Your local freecycle site might have helpful items available, as does Netmums Nearly New, your local paper and online auction sites.

If there's something you need to pay for, settle the bill with cash, especially if you're around local shops. Leaving your credit/debit cards at home will prevent you from spending cash on anything other than what you really need.

Helpful resources

Not sure where to go for advice and help? Try the following organisations: